Oil, gas stakeholders jittery as crude price rises above $50

Stakeholders have expressed fear over the steady rise in crude oil prices which hit close to $56 per barrel at the weekend, warning that this might translate to more hardship for Nigerians.

The sharp rise in oil prices may not be unconnected with the decision of Saudi Arabia to cut more than one million barrels of oil per day(BPD) shortly after the Organisation of Petroleum Exporting Countries (OPEC)meeting last week.

Indeed, oil prices remained elevated and were still on the rise last Thursday, hitting an 11-month high, as the effects of Saudi Arabia’s announcement of one million barrels of crude oil production cuts per day for the months of February and March 2021 still has enough juice.

Commenting on what the increase means for Nigeria, former Chairman, Society of Petroleum Engineers (SPE), Nigeria Council, Mr. Joe Nwakwue, said a rise in oil price should be joy for any oil producing nation but said same could not be said for Nigeria. He lamented that the failure of Nigeria to work around its failed refining capacity would lead to more hardship for Nigerians as the price of fuel would certainly go up with Nigerians facing the brunt.

The Petroleum Engineer said while other countries with enhanced capacity would have more money to development projects, Nigerians rather than enjoy lower fuel prices should be ready to pay more in the coming months should the prices be sustained.

He explained further that resources that should go into other areas of development  and impact citizens would be used in paying subsidy.

‘‘Though government claimed to have exited the subsidy regime but is that truly the position of things in the country now.

“Has government carried along labour and Nigerians in their claim to have truly exited subsidy? Are we seeing the gains of subsidy removal in terms of improved lifestyle? The anxiety Nigerians have today, especially when oil prices go up is because we are still in a subsidy regime. This should not be so. Government should carry labour along and get to do away with subsidy once and for all.’’

Also commenting, the Managing Director of Cowry Assets Management Limited, Mr. Johnson Chukwu, said the rise would definitely erode the purchasing power of Nigerians because that would mean a rise in the pump price of fuel.

He said because Nigeria has failed to fix its ailing refineries that would be the price to pay which he said should not have been the case if the country has done what it should do with its oil wealth.

What is even more worrisome for Chukwu is the inability of government to completely deregulate the downstream sector so as to free up funds for other critical sectors of the economy.

In April 2020, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, had said Nigeria would no longer be paying for under-recovery or subsidy on petrol, especially due to the current development in the global oil sector.

‘‘There is no subsidy and it is zero forever, going forward, there will be no resort to either subsidy or under-recovery of any nature.

“NNPC will play in the market place, it will just be another marketer in the space. But we will be there for the country to sustain the security of supply at market price.”

Last November, Minister of State for Petroleum Resources, Mr. Timipre Sylva, had during a live interview on Channels Television, Politics Today, contradicted Kyari when he said  the Federal Government has not totally removed subsidy on petrol.

In March, the government introduced a price modulation policy where international product prices and associated landing costs in Nigeria are used to determine the retail price of petrol. The recommended retail price is announced periodically by the Petroleum Products Pricing Regulatory Agency (PPPRA).

“We are still trying to manage this bumpy start. We have not been able to get to that 100 per cent removal of subsidy from the foreign exchange end,” Sylva said.

Sylva said it would be a knotty issue if the government decides to lay off refinery workers as there would be a lot of labour issues to deal with.